Demography matters

New Zealand does not have a good record when it comes to anticipating population growth. The country added another million residents to reach 5 million in March 2020, 11 years before the original forecasts.

The difficulty is that there are so many factors in play. Essentially, the core components are fertility, deaths and migration, both international and domestic. That is why StatsNZ talks about “projections”, not “predictions”.

The Long Terms Plans (LTPs) for the local authorities in Hawke’s Bay (which cover the period 2021 to 2031) are upbeat about future population growth. 

How realistic are these forecasts? 

Perhaps misleading is that New Zealand has just ended an extraordinary period of population growth. In 2011-12, as the Global Financial Crisis came to an end, New Zealand and its regions experienced very low growth as thousands left the country to live permanently in another country. In 2012 alone, 53,800 New Zealanders went to live in Australia.

Since then, the country’s annual population growth climbed and reached an annual gain of 2.1% through the 2013-20 period, compared to an OECD average which declined from 0.6% to 0.4% per annum in the same period. 

What’s happening?

In 2013, births per women for New Zealand was still at a replacement level of 2.1; but by 2021, this had dropped to 1.6, meaning that the birth rate per woman was at a level that does not replace the existing population. I fully anticipate that this rate will decline even further as a result of Covid.

The second factor was ageing as the Baby Boomers arrived at the age of 65 from 2010 onwards. We’ll see a growing proportion of communities aged over 65. In the next decade, a tipping point will be reached and there will be more over the age of 65 than under the age of 14. 

But the key factor in driving population growth between 2013-20 has been the very high rate of immigration. Since 2013, the numbers of migrants arriving as permanent residents has grown significantly while the temporary migrant worker population in New Zealand has doubled.

When New Zealand went into lockdown in March 2020, New Zealand had just recorded an annual net gain of over 79,000 migrants, the highest ever in New Zealand’s migration history. There were also 221,298 migrants here on temporary work visas and another 82,000 on study visas. 

In short, the very high population growth rates were a result of the very high levels of immigration. 

What about Hawke’s Bay?

The first thing to say is that Hastings and Central Hawke’s Bay grew at the annual national rate of 2.1% during some of these years; Napier was slightly lower at 1.5%. Inevitably, this has put a strain on resources, not to mention having a major impact on local labour supply. But this growth will not continue. Projections anticipate a significant decline in these growth rates over the next two decades.

The Napier LTP is the only one that appears to indicate the likely trajectory from an annual rate of population growth of 1.5% to 0.4% in the late 2020s, and then down to a very modest 0.2% by the 2040s. 

Hawke’s Bay, like the rest of New Zealand is now beginning to experience declining fertility. In the period 1996-2001, there were over 11,000 births locally (when the local population was smaller); by 2013-18, the number of births had dropped to 10,600. The population of the region had grown by 17.5% but births had dropped by 4%. By the late 2030s, the number of local births will have dropped further.

In most centres, those aged under 14 make up about 20% of the local population currently. That will change. By 2038, this younger age group will comprise 17% of the population in Hawke’s Bay. This will be compounded by young adult out-migration from the region. There will be fewer younger people.

This fertility decline is especially true for Pākehā but less so for Māori. A growing proportion of Hawke’s Bay’s population will be Māori; by 2038, 33% of the local population will be Māori (the figure for New Zealand then will be 18.3%) and up from the current situation where 27% of Hawke’s Bay’s population are Māori.

Instead, the region will become old-dominant. Those aged over 65 will grow from 16% of the population to 31% in 2038. The combination of fewer births and more deaths means that natural increase (the number of births versus the number of deaths) will go from adding a 1,000 to the Hawke’s Bay population over each five-year period to only an estimated 200 people – or 40 additional people per year – by the 2030s.

These two projections are solid and unlikely to change, which then leaves migration.

Migration myths

The history of attracting and retaining migrants to Hawke’s Bay is somewhat uneven. In the late 1990s, Hawke’s Bay saw a net loss of almost 1,000 international and domestic migrants each year. This turned into an annual net gain of over 2,000 people per year in the 2013-18 period.

Covid has brought a grinding halt to both permanent and temporary international migration. It has also reduced the number of returning New Zealanders. More on that soon. Given the extremely high numbers that were involved in the years up to 2020, it is very unlikely that the country – or Hawke’s Bay – will return to these levels anytime soon, if ever. 

This is confirmed by the fact that the government has signaled that it is time to review the immigration policy settings and numbers involved. The Productivity Commission has been tasked with this. 

Hawke’s Bay has done well in recent years in attracting migrants, especially internal migrants (those arriving from other local authorities). International migrants not so much.

The local LTPs all assume that growth will be driven by attracting migrants. There will certainly be those attracted for lifestyle reasons. But international migrant flows will be small and probably non-existent for some years (2-5?) as a result of Covid. 

If Hawke’s Bay local authorities are betting on the attractiveness of the local lifestyle and the role of Covid in encouraging new ways of working, there will be an effect, but it might be rather smaller than anticipated.

Take one example, returning New Zealanders. Reading media stories and the reference in the Hastings LTP to “returning New Zealanders” offsetting the drop in international migrants, you would think that there is a significant increase in New Zealanders coming home. No, that has not happened.

In most years, more New Zealanders leave the country than arrive as migrants (those who have been away for 12 months or more). But a quick comparison with the year before Covid and the year after lockdown shows that the number of returning New Zealanders has dropped by 48%! A recent MBIE survey of these returning New Zealanders show that they are most are likely to go to Auckland. There has been a major reduction, not an increase as many would think. 

The net ‘gain’ in migrants is deceptive – a result of the fact that fewer New Zealanders are leaving (80% fewer). And we have just changed the dynamics of New Zealander arrivals and departures by opening a bubble with Australia with their labour shortages and higher pay. Are we going to see a major outflow over the Tasman? 

More thought required

I do not want to dampen the optimism apparent in the local LTPs regarding future population growth, but I would really like to see a much greater emphasis given to:

• What drives a changing population profile; 

• The possibility of low population growth (or stagnation); and 

• How to attract and retain populations, including immigrants. 

Population projections involve a range of assumptions. There is a modest indication of these in the Napier LTP and the Central Hawke’s Bay LTP bases its projections on a report by Squillion Ltd. But is this enough? What happens, for example, if population drives economic growth (labour and skill availability, maintaining demand for health and educational services, leisure and cultural opportunities), rather than the other way around?

The Hastings LTP says that “increased population growth over recent years … is expected to continue into the future, due to both lifestyle attractions and economic development opportunities”. I simply do not share this confidence. 

Recent population growth is a product of a very unusual period of population history, for the country and the region. The elements that contribute to population growth are changing, and changing rapidly: declining fertility, rapid ageing, and low or modest international migration. There will be some internal migration but not at a rate that will keep population growth at recent levels.

Understanding population trends and drivers has major implications for local authorities as they seek to plan for a future that is going to be significantly changed by the combination of demographic transformation and the impacts of a pandemic – and that is without considering the changing nature of work. 

The ageing of communities will have a wide range of impacts, from a reduced ability to afford increased rates because of the proportion who are now on a fixed income (superannuation) through to the need to provide very different facilities and services. An immediate issue is the provision of long-term care beds. Who pays? And where should they be located? 

Declining fertility and reduced access to migrant workers will result in ongoing and significant labour shortages. How innovative, or effective, can local authorities be in compensating for such significant labour market issues?

The Economist recently talked about the growing “labour crunch” in the rich world and the need to consider the three”Ps” : “payments” (as in do we pay domestic workers adequately?); “passports” (what will post-Covid migration look like; and “patience” – there are no quick fixes. I would add “population” – the need to better understand and anticipate that the population growth Hawke’s Bay has experienced recently has come to an end. 

Postscript

Since written for the September/October issue of Bay Buzz, the world of COVID has provided surprises. Already, some of my observations are out of date.

The first is that despite the country’s best intentions, Delta arrived from New South Wales. International travel bubbles, in this case with Australia (that should be New South Wales and Victoria) are proving to be a mixed bag. I just wish more notice had been taken of our public health experts at the time.

The second was unexpected : the offer from the government to 165,000 people on temporary visas, mostly work-related, and who are currently in New Zealand to have the opportunity to apply for permanent residence. This means that if all 165,000 apply, and if they meet the (generous) qualifying conditions on offer, then the New Zealand population would grow by about 3.5% in 2022 alone, without taking into account local natural increase and the possibility that there will be new migrant arrivals as New Zealand cautiously opens up for new applications from off-shore migrants.

But there is nothing cautious about the latest offer. Next year will see major population growth – and Hawke’s Bay will certainly be a beneficiary.